Where does the University's money go?

Minnesota’s dire economic straits mean budget cuts for every state-supported entity. Accordingly, the University of Minnesota is facing a drastic reduction in its state appropriation. How drastic has yet to be decided, but Gov. Tim Pawlenty has recommended a reduction of $151 million for the coming biennium, plus a further $36 million reduction starting in 2010.

To close the gap, the university’s administration is proposing severe budget cuts accompanied by tuition increases. But these cuts are primarily directed at academic programs, which are precisely what students pay tuition for. The good people of Minnesota fund roughly one-quarter of the university’s budget, and this is a good time to ask what they are getting for their money.

We can start by examining where the budget has grown over the last five years. The budget plan for the current year includes an increase in total expenditures of 27 percent over the figure for 2004-05. While inflation can account for some of the additional half-billion dollars in expenditures, the increase has been quite unevenly distributed. Where have the university’s costs increased the most?

During the last five years, expenditures for instruction have risen 29 percent. This growth can be accounted for by several factors, some directly related to the university’s core mission and others largely beyond its control. New and growing programs require additional instructors, and in some years faculty get merit-based pay raises (though not this year, in which hiring as well as wages are mostly frozen). Meanwhile, health insurance costs keep increasing for both employers and employees.

Expenditures in several other categories have risen as well, but generally by a smaller percentage. Meanwhile, expenditures on scholarships and fellowships have actually gone down by almost $9 million (about 8 percent) since 2004-05.

But in one category, expenditures have nearly doubled over the last five years. That category is "institutional support," which consists essentially of central administration. The 2008-09 budget plan increases expenditures for institutional support by more than $143 million, or 80 percent, over the figure for 2004-05. The spending increase in this category alone covers the amount by which the governor proposes to reduce the state’s annual appropriation to the university.

What has the university bought with all this additional money spent on "institutional support"? Among other things, a growing array of vice presidents and associate vice presidents. The university now employs 12 VPs, several of whose positions have been created during the last five years. Every occupant of such a position earns a six-figure salary, starting at around $250,000 per year. Multiply by twelve, add a number of associate VPs, then staff support, plus assorted expenses for everything from office supplies to travel — and the institution spends millions more each year on central administration.

But is all that administration worth it? Does it make a commensurate contribution to the university’s core missions of teaching, research and public service? Most top administrators neither teach nor do research (though there are exceptions). Many faculty, staff and students feel we could do without most of the services they do perform, which in our experience tend mainly to increase the administrative burden of our work. Moreover, they operate with little meaningful public oversight or accountability. A dramatic example is the administration’s recent decision to abolish the Graduate School and appoint a new VP of graduate education, citing possible cost savings that might come at the risk of undermining the university’s very purpose. This decision was taken without faculty consultation, in violation of university policy. Despite strenuous faculty and student opposition, the regents have acquiesced to it.

In sum, the huge increase in expenditures on central administration over the last few years has produced little return on the public’s investment in education at the university. Cutting central administration down to 2004-05 levels would shrink the university’s budget without doing appreciable harm to academic programs.

One way to cut it would be to reduce the number of top administrators. Eliminating just a few positions that are overpaid in relation to their contribution to the university’s core mission would save millions. Another way to cut costs, and not only in administration, would be to cap salaries.

We propose that the state of Minnesota require, as a condition of its appropriation to the university, a salary cap of $250,000 per year for all university employees. Such a cap would cause no one any pain. It would save millions of dollars annually, helping to preserve academic programs from cuts that would do the university, and therefore the public, real harm. It would help make further tuition increases unnecessary.

This cap could be a temporary measure, to be reconsidered once the economic crisis passes. In the meantime, those who would be affected ought not bemoan being dropped into a lower tax bracket.

Eva von Dassow and Timothy Brennan are professors at the University of Minnesota. This article reflects their personal views.